Statement by an IMF Mission to Colombia

An International Monetary Fund (IMF) staff mission led by Robert Rennhack, Division Chief in the Western Hemisphere Department, issued the following statement today in Bogotá:

"For the past week, the IMF team has been on a routine visit to review recent economic developments and the outlook. Colombia's economy continues to evolve very favorably, in key areas better than expected under the government's economic program, which is supported by the IMF. A sound economic framework as well as the external environment have contributed to the favorable economic outcomes.

"Thus, real GDP has been growing at 4½ percent in 2005, faster than envisaged, led by investment and exports. This growth has helped reduce urban unemployment to about 12 percent in October. Inflation is likely to fall to 5.0 percent by year-end, as targeted. The external current account deficit has been well contained at 0.9 percent of GDP on the strength of high world prices of oil as well as robust growth in coffee, coal and nontraditional exports. Reflecting market confidence, private capital inflows, especially foreign direct investment, have picked up. Net international reserves are expected to reach about US$15 billion by end-2005.

"Economic policies have been well managed. The combined public sector deficit is expected to amount to about 1.2 percent of GDP, below the program target of 1.6 percent of GDP, benefiting from strong growth in tax revenues spending restraint, and surpluses by the territorial entities. The public sector's prudent debt management has helped reduce vulnerabilities by extending maturities and significantly lowering foreign currency debt. Monetary policy has remained focused on achieving the inflation target, and the government has helped sterilize the monetary effects of foreign exchange intervention by building up its deposits in the Banco de la Republica. With regard to structural policies, Granahorrar has been sold and the quality of information on local government operations has been improved. The decree to adopt many elements of the revised budget code is about to be issued.

"An IMF mission will return to Bogotá in February to conduct the discussions for the second review under the Fund-supported program, with a view to reaching understandings on the economic policies and objectives for 2006."